Have you signed an employment contract including a non-compete clause? We are often asked if such clause is valid and applicable. Dutch law provides a set of legal requirements to the validity of the non-compete clause and an escape route to prevent possible unfair consequences.
What is a non-compete clause?
A non-compete or non-competition clause (in Dutch: concurrentiebeding) prohibits the employee from being directly or indirectly active or involved in a business performing similar activities during and after the term of the employment contract. In this way, the employer tries to protect the company interests and to keep valuable knowledge and experience within the company. Breaching a non-competition often triggers a contractual penalty clause.
A variation: the non-solicitation clause
The non-solicitation clause is a variation of the non-compete clause. The non-solicitation clause prohibits the employee from being active for or having contact with clients or other business relations of the employer after the term of the employment contract. The rules regarding a non-compete clause also apply to a non-solicitation clause.
Validity of a non-compete clause
A non-compete clause is a far-reaching restriction of the employee’s freedom of choice of employment. Therefore, the clause is only valid and enforceable under the following conditions:
- It must be agreed upon in writing, for instance in the employment contract;
- If the job position changes, or in the event of a reorganisation, it may be required to reconfirm the non-compete clause in writing if the clause has a greater impact on the employee as a consequence of the job change and/or reorganisation;
- For employment contracts for a definite period of time, non-compete clauses are only permitted if justified by the required protection of serious business interests. The justifying reasons must be confirmed in writing. The employer can only rely on the non-compete clause if the business reasons still exist when the employment ends;
- Employees younger than 18 years old may not be restricted by a non-compete clause.
Nullification by the court in case of unfair consequences
If the non-compete clause meets the legal requirements set out above, the clause is, in principle, valid and enforceable. However, Dutch law provides an escape route: if the employee is unfairly disadvantaged by the clause, the employee may request the court to nullify the clause in whole or part. The court will weigh the personal interests of the employee in relation to the business interests of the employer. Rather than nullifying the clause, the court may also moderate the clause in terms of duration and/or scope, for instance the geographical area, the range of competitors or the type of precluded activities.
If you have any questions regarding a non-compete clause or non-solicitation clause, our lawyers are happy to help you in both English and Dutch.